Israeli entrepreneurship and the developing world

Knowledge of the developing world and the needs of its people is going to be a crucial element for future success on a global level.

Agriculture in Africa 311.
(photo credit:Courtesy No Camels)

As we enter 2013, it seems like a fitting time to question what lies in store
for the “Start-Up Nation” in the coming years. A long-standing debate exists on
the source of entrepreneurial opportunities.

With Israel’s strong ties to
America and Europe, it is unsurprising that most of the opportunities Israelis
pursue involve developing gizmos and gadgets that answer recognized needs in the
Western world. In this respect Israel the “Start-Up Nation” is certainly at the
forefront of the types of innovative technologies that improve Western
consumers’ lives by making them simpler and more convenient or
entertaining.

However, Europe and North America comprise only 15 percent
of the world’s population and its share in global GDP is constantly shrinking.
Sub-Saharan Africa and Asia, on the other hand, are seen as strategically
significant and rapidly growing new markets with annual average real GDP growth
rates of 5.7% and 7.9%, respectively, compared to the OECD average of 1.65% in
the past decade.

These countries are also places where a multitude of
crucial basic needs – ranging from food and water to basic sanitation and
medical care – remain largely unfulfilled.

In some parts of the world
there is huge competition in the development of smartphone applications to read
the calorie count of a QR code, while in other regions people are still not
receiving enough calories to meet their daily needs. On a global level, it seems
that Adam Smith’s “invisible hand” does not seem to reach far
enough.

However, finding solutions to the challenges faced by world’s
four billion poorest people need not necessarily call for ethically driven
interventions such as increased foreign aid or charitable donations that often
breed dependency. Rather, it is becoming more and more recognized that some of
the solutions may lie in imparting the information and knowledge that could
allow entrepreneurs to overcome these market failures and turn the world’s vast
needs into profitable and mutually beneficial
opportunities.

INCREASINGLY, BUSINESSES are becoming aware of such
opportunities and shifting their focus to emerging markets, which are seen to be
the source of future growth opportunities. There are innumerable examples of
successful ventures in this field, from Safaricom – which together with local
partners developed M-Pesa, a mobile banking system in Kenya that is now
generating revenue of $203 million and directly employing over 50,000 people –
to Sproxil, a company that has developed a text-message-based drug verification
system that is saving thousands of lives and millions of dollars on counterfeit
drugs each year.

But it’s not only hi-tech. Companies such as
Procter&Gamble or Unilever have for many years been focusing on their
expansion into the developing world. Even products as simple as soap can prevent
diarrhoea, which causes over 2.6 million deaths each year.

A few Israeli
companies are also active in the developing world. For example, Netafim, with
its drip-irrigation systems, has been selling Israeli technologies to farmers in
developing countries for over 40 years. Other companies, such as Arava Power,
are realizing the opportunities that the developing world offers for renewable
energy technologies. These businesses are not doing this because it’s good
corporate social responsibility, although they do have dual social and profit
motives. They are doing it because they understand that targeting these
populations makes good sense financially.

INSTEAD OF designing another
expensive hi-tech product for the tiny fraction of the world that can afford
such items, re-focusing Israel’s entrepreneurial ability on solving these
problems provides far more exciting opportunities. With its close proximity to
Africa and Asia and its expertise in water, agriculture, renewable energy and
medical technologies, Israel has the potential to be one of the leading sources
of innovative solutions to problems facing the developing world.

Of
course, “doing well by doing good” is no easy task and many such ventures have
failed in the past. However, this is the nature of entrepreneurship and for
those that succeed, there is a potentially sizable pay-off, both financially and
socially.

Such a task demands not only innovative technologies, but also
inventive business models to accompany them. Businesses need to find ways to
generate revenues despite the limited budgets and volatile earnings of their
target population. This is a challenge not only for the Israeli hi-tech word but
also for Israeli businesspeople who need to understand how to commercialize
these products in often challenging market conditions.

For example,
pay-as-you-go solar power or single-sachet packaging have been found to be
solutions to the poor’s small and volatile cash flow patterns and lack of
savings.

NGOS AND aid agencies with experience in these countries who
understand the local context and social practices also have an important role to
play in identifying these needs and helping to generate appropriate solutions.
For example, the Jewish Heart for Africa organization, which works to bring
sustainable Israeli technologies to African villages, has accumulated much
experience since its establishment in 2008, experience that can be utilized by
Israeli companies looking to enter these markets while expanding the JHFA’s
potential reach.

Although priorities may differ, the general goals of
these different players can be aligned as the efforts required to make such
businesses viable are similarly important for generating systemic and
sustainable social change, desired by NGOs.

Internationally, these
different worlds are beginning to merge. All the top business schools feature
classes on social entrepreneurship or “business model innovation for the base of
the pyramid,” and divisions focussing on private-sector-led development have
become a feature of most leading international development agencies. The
question is, where does Israel stand in this burgeoning
“business-for-development” movement?

THIS IS the question that will be posed at
the ID2 (Israel Designed, International Development) conference that will be
taking place from January 7-9 in Mitzpe Ramon, which will focus on bringing
together leaders from the private sector, government agencies and
non-governmental organizations to brainstorm on harnessing Israeli innovation to
solve international development challenges.

Knowledge of the developing
world and the needs of its people is going to be a crucial element for future
success on a global level and the sooner Israeli entrepreneurs understand this,
the sooner they will begin to reap the financial and social rewards that these
development opportunities provide.

The writer holds a master’s degree in
international development from the London School of Economics and is working as
a financial analyst. She is the conference coordinator of the ID2 conference.
For more information visit http://www.id2.org.il.